Some Major Agency Actions Will Slip Through Cracks of President’s “Improving Regulation” Order

Statements of support from the regulated and expressions of consternation from Big Government activists should lead most free enterprise enthusiasts to conclude that President Obama’s “Improving Regulation and Regulatory Review” Executive Order is a positive development. While Washington Legal Foundation certainly sees it as an encouraging step in the right direction, this order – like other regulatory policy executive orders issued by past presidents – comes up short in two critical ways. First, the order does not apply to “independent” federal agencies, including the Securities and Exchange Commission, which is cranking out new rules to implement the Dodd-Frank law at a breakneck pace. Second, the order fails to address the numerous, creative ways that federal agencies oversee economic commerce other than by issuing formal regulations.

We’ll focus on this second shortcoming here. Federal agencies set rules and policies for regulated entities more frequently through guidance documents, policy statements, “interim” rules, and enforcement actions than they do through formal regulations. Such actions not only evade the current and former presidents’ regulatory executive orders, they also avoid the due process protections contained in the Administrative Procedures Act (APA). We noted one example of this in a past Legal Pulse post on the revitalization of the environmental justice movement.

Another troubling example, which strikes directly at the heart of America’s health care, is the Food & Drug Administration’s (FDA) reliance on “warning letters” to dictate how medical product makers can utilize “social media.” Drug and medical device companies have been pleading with FDA for rules on what it can do in such online spaces as Twitter, Facebook, blogs, etc. No clarity currently exists on such key issues as whether companies can respond to unsolicited requests by consumers; whether and when they are responsible for third parties comments about their products; and what information they must provide when the communication medium offers limited space. Instead of answers, regulated industries have been hit with case-by-case enforcement of rules created with “old” print and broadcast media in mind.

FDA’s most recent social media enforcement action was an “untitled” (warning) letter it sent to Novartis last summer for the company’s use of a Facebook “widget.” The widget allowed website visitors to post comments about Novartis’s Tasigna drug on their Facebook profiles. Because the widget device did not allow for including the type of risk information and caveats about Tasigna which FDA demands, the letter informed Novartis that it had “misbranded” its drug. A recent WLF Legal Opinion Letter provides more analysis of the FDA action.

If FDA persists with this approach, companies will be forced to glean rules and principles from disparate, distinct enforcement actions, which will in turn chill vital health care communications. This is contrary to one of the “General Principles of Regulation” President Obama’s Executive Order sets out: “[Our regulatory system] must promote predictability and reduce uncertainty.” Drug and device companies’ move into social media has been profoundly slow, with the lack of clear rules cited as the main reason for such caution.

FDA’s proposed solution – a set of informal guidelines, rather than formal regulations – has been repeatedly delayed. Guidelines would certainly be a step up from regulation-by-warning letter. But what if the guidelines are so suffocating or imprecise that medical product makers are forced to remain away from social media? Because such guidelines are exempt from APA due process requirements and beyond scrutiny under the Obama regulation Executive Order, companies and affected consumers would have limited options if they wished to oppose FDA’s decision.